1256 contracts loss (carryback or carryover)

Discussion in 'Professional Trading' started by cml2949, Mar 21, 2012.

  1. cml2949


    Hi , I've searched this forum, but haven't not came up with an answer.
    If I made a profit trading 1256 contracts in 2010 and loss in 2011. I want to check this forum before I head over to my cpa..

    Why would someone elect a loss carry back versus a loss carryover to the next years?

    Assuming I paid taxes on $10,000.00 profit for 2010 and loss $10,000.00 for 2011, would I get refund of taxes I paid on that profit for 2010?

    Seems to be the advantage is carryback because who knows if you will have capital gains in the future...

    Thanks in advance
  2. lwlee


    Don't think you can carry loss backwards unless you are an entity (S-Corp, LLC, etc).

    I'm in a different situation, my CPA screwed up my taxloss carryover numbers for 2007 and 2009. I'll need to amend my previous tax returns to realize the tax loss. I was wondering whether I could just amend next year's tax return and take the $3400 loss against this year's profits.
  3. That was the old rules.

    Now, there is no "carry back", only "carry forward"... at least for individual returns.
  4. Take advantage of the 3 year carry back. These losses can only be carried back to a year in which there is a net Section 1256 contracts gain, and only to the extent of such gain. You had gain in the earlier year. The loss is carried back to the earliest carry-back year first and any unabsorbed loss can then be carried to each of the next two years. So if you have a net loss for the year, you can amend a previous year's tax return and possibly get a refund. You are right about next year--who knows what will happen.
  5. mgarc


    come on guys, before you say something, make sure it's correct. yes you can carry back losses, and yes you will get a refund.

    look at 2011 IRS publication 550, page 41.

    advantage of carryover is the possibility that tax rates will increase in the future. that is if you are confident of making money in the years ahead.
  6. cml2949


    Hmm mixed responses ..

    I've seen support for both views..
  7. mgarc is correct
  8. You want the tax benefit today (carryback) or possibly some time in the future (carryover)? The loss carryback is one of the two tax-favored provisions given to section 1256 contracts, so why not take advantage of it? It is usually a good idea to take the benefit today.
  9. nkhoi

    nkhoi Moderator

    didn't know there is such thing, is this a new rule?
  10. See IRC Section 1212(c). I believe the provision was added to the Code in 1981.
    #10     Mar 21, 2012